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Frameworks for business scaling and success

7 min read

From: alexhormozi

Building a successful business relies not just on hard work, but on strategic decision-making and leveraging opportunities. As recounted by Warren Buffett, a single decision can dramatically alter life outcomes, emphasizing that it’s “not as important how hard you row, but what boat you are in” [00:43:00], [00:00:43]. This perspective highlights the critical importance of selecting the right opportunities and applying effective frameworks for business growth [00:01:12].

Understanding Level 7 Entrepreneurship

The concept of “Level 7 Entrepreneurship” involves viewing businesses as products that increase personal net worth [00:01:05]. It’s about assessing and appraising opportunity itself [00:01:12]. While the speaker describes himself as a “Level 7 entrepreneur” [00:01:44], he admits feeling more like someone taking “a couple steps forward and one toe after the other” [00:02:02].

Early Observations of a Level 7 Entrepreneur

The speaker shares several observations on wealth and the entrepreneurial journey:

  • Everyone wants you to do well, “just not better than them” [00:04:06].
  • “No one actually wants you to be rich except for you” [00:04:10].
  • Money solves only money problems, leaving you with problems money can’t solve [00:04:19].
  • You don’t “arrive”; you just enter a new club as the smallest member [00:04:25].
  • Passive income can be overrated; engaging activities and options are often more fulfilling than pure freedom [00:05:24].

The Foundation of Success: Time Allocation

The core premise for achieving material success is that “time allocation is the only thing that matters” [00:51:00]. Mastering time means mastering material success [00:09:53]. Speed in business comes not from constant activity, but from making the right strategic decisions and minimizing mistakes [00:10:27].

“90% of success can be boiled down to consistently doing the obvious thing for an uncommonly long period of time without convincing yourself you’re smarter than you are.” [00:11:04]

The Multiplier on Time: Leverage

The key multiplier on time is leverage [00:12:13]. The size of opportunities pursued is directly proportional to the amount of leverage that can be employed [00:12:18]. “Rich dads” encourage high-leverage opportunities like real estate, funds, or business ownership, while “poor dads” suggest low-leverage paths, forcing their kids to learn the hard way [00:12:26].

It’s “harder to build a small business than a big business” because top talent is attracted to big opportunities [00:13:18]. Small goals and big goals are equally difficult in terms of time commitment, so it’s better to aim big [00:13:38].

Four Frameworks for Applying Leverage

These frameworks are used for investing in portfolio companies and scaling existing ones [00:14:02].

1. Scale the Entrepreneur

Every business is bottlenecked by the entrepreneur in one of three ways:

“If any side of that ladder is missing, no matter how developed the other components, you will be limited to the lowest rung.” [00:15:59]

Examples of deficiencies:

  • Trait Deficiency (Focus): Having too many businesses (e.g., 10 businesses with no money) due to the “niche slapping fallacy,” where one believes pursuing all options will lead to one succeeding [00:16:21]. Focus is crucial; competing against those with one single focus puts you at a disadvantage [00:17:46].
  • Belief Deficiency (Opportunity Scale): Believing that running multiple gyms is the path to scale, rather than teaching others your model. The insight from Russell Brunson was that the speaker had a “level 10 skill set in a level two opportunity” [00:18:55], leading to a pivot from gym owner to licensor [00:19:59].
  • Skill Deficiency (Sales Management): Complaints like “no good sales people exist” or “my sales team is inconsistent” are skill deficiencies in recruiting, interviewing, training, and managing high-performance sales teams [00:20:10]. Skills exist on a continuum, not as binaries [00:21:04].

Improving skills comes from “repetition and feedback, aka volume” [00:21:29]. Conviction comes from having done something so many times you’re bored of it [00:22:52]. The biggest deficiency for many is unrealistic expectations (e.g., becoming a millionaire in 90 days) [00:23:29]. “I’d rather get rich for sure than get rich quick” [00:23:59].

Skills, traits, and beliefs all compound, yielding “crazy outside returns seemingly overnight” [00:24:05].

  • Skill Stacking Example (Financial): Good at math → Bookkeeping → Accounting degree → Tax strategy → Insurance → Negotiate deal structure → Mastery of capital markets (Rainmaker) [00:24:29].
  • Skill Stacking Example (Speaker’s): Get in shape/work out → Nutrition → Sell → Market locally → Operate (scaled to 6 locations) → Scale sales teams → Market B2B nationally. This stack led to rapid growth (0 to $28M/year in 20 months) [00:25:51].

2. Scale the Market

Picking the right market is crucial. A “starving crowd” is the most valuable competitive advantage, regardless of other factors [00:30:18].

Four attributes of a good market:

  • Pain: They desperately need what you sell [00:30:43].
  • Able to Afford: They have the financial capacity to buy your service/product [00:30:49].
  • Easy to Target (Tactical): The audience is identifiable and reachable [00:31:05].
  • Growing: The market is expanding, providing a tailwind for your business [00:31:22].

Five ways to scale an existing market:

  1. Up Market: Target larger entities (e.g., multi-location owners, chains) [00:34:02].
  2. Down Market: Target individuals who will eventually become your ideal customer (e.g., hair stylists for salon owners) [00:34:09].
  3. Adjacent Market: Target similar customer bases with core desires (e.g., lashes and nails for salon owners) [00:34:15].
  4. Broader: Expand to a wider range of related services (e.g., med spas, massage for salons) [00:34:25].
  5. Deeper: Maximize existing market penetration (e.g., acquire competitors, use new platforms, increase ad budget) [00:34:36]. “Do the boring work” [00:34:55].

3. Scale the Deliverable

This framework acts as an “opportunity lens” for any venture [00:35:11].

The Four C’s to Leverage:

  1. Labor: Traditional leverage, but requires permission (paying people) [00:35:44].
  2. Capital: Higher leverage, used by billionaires like Buffett and Munger, also requires permission [00:36:07].
  3. Code: Permissionless leverage; software can be duplicated infinitely at no cost [00:36:34].
  4. Content/Media: Permissionless leverage; zero cost of replication, like a podcast [00:36:48]. The new fortunes are built with permissionless leverage (Code and Content/Media) [00:37:06], and the top performers use all four (Labor, Capital, Code, Content) [00:37:21].

The speaker’s own trajectory demonstrates jumps in leverage:

  • Employee (someone else’s labor) → 4 figures/month [00:37:56]
  • Trainer (own labor) → 5 figures/month [00:38:05]
  • Gym Owner (leveraging labor) → 6 figures/month [00:38:13]
  • Licensor (labor + media) → $1M/month income [00:38:28]
  • Acquisition (labor + media + capital) → Aiming for 8 figures/month [00:38:49]
  • Full stack (all four) → Aiming for 9 figures/month [00:39:01]

The Delivery Cube offers variables to optimize product/service delivery and profit:

  • Setting: One-on-one, small group, or one-to-many (adjust pricing accordingly) [00:40:01].
  • Involvement: Do-it-yourself (DIY), Done-with-you, or Done-for-you solution [00:40:09].
  • Support Level: Tech, chat, email, phone, or Zoom support [00:40:20].
  • Consumption: Written, live, audio, or video [00:40:41].
  • Speed & Convenience: 24/7, 9-5, specific response times [00:40:53].
  • Value vs. Price Thought Experiments:
    • 10x the price: What would you deliver? [00:41:29]
    • 1/10 the price: What else would you build that costs nothing to replicate? [00:41:50]
    • If marketing stopped: How different would your client experience be if new customers only came from referrals? [00:42:29]

Six “base chunks” you can sell:

4. Scale the Business

This framework outlines what to focus on at different revenue levels for scaling business operations [00:46:27]:

  • 0-1 Million Revenue:

    • Objective: Consistently sell something people actually want [00:47:41].
    • Focus: One product, one avatar, one channel [00:47:12].
    • Problem: Not knowing what you’re doing [00:47:40].

  • 1-10 Million Revenue:

    • Objective: Increase lifetime gross profit per customer [00:47:53].
    • Problem: Not making enough take-home profit to scale [00:48:09].
    • Solution: Add higher leverage deliverables [00:48:15].

  • 10-50 Million Revenue:

    • Objective: Professionalize the business and ensure consistent delivery [00:48:26].
    • Problem: Inconsistent delivery, poor tracking, messy finances [00:48:37].
    • Solution: Hire high-level, experienced talent who have scaled before [00:48:43].

  • 50 Million+ Revenue (Framework X):

    • Objective: Attract talent to drive growth and new revenue streams [00:49:19].
    • Problem: Innovation dies due to one entrepreneur’s limitations [00:49:26].
    • Solution: Business becomes a conglomeration of many businesses with incentivized “stallions” (CEOs) running their own P&Ls [00:49:34].

The speaker highlights the importance of internal business functions mirroring external metrics (e.g., tracking applications and interviews for hiring, not just sales calls) [00:50:31]. Often, a business is “one amazing hire away from all the growth you ever wanted” [00:52:38].

For more frameworks, resources are available at acquisition.com [00:53:07]. The belief is that you “should only have to get rich once” [00:53:28].

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